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CIRCULAR No. 93/2004/TT-BTC OF SEPTEMBER 29, 2004 GUIDING A NUMBER OF CONTENTS OF THE REGULATION ON SETTING UP, ORGANIZATION AND OPERATION OF CREDIT GUARANTEE FUNDS FOR SMALL- AND MEDIUM-SIZED ENTERPRISES

Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Finance Ministry;

Pursuant to the Prime Minister's Decision No. 193/2001/QD-TTg of December 20, 2001 promulgating the Regulation on setting up, organization and operation of credit guarantee funds for small- and medium-sized enterprises;

Pursuant to the Prime Minister's Decision No. 115/2004/QD-TTg of June 25, 2004 amending and supplementing the Regulation on setting up, organization and operation of credit guarantee funds for small- and medium-sized enterprises, promulgated together with the Prime Minister's Decision No. 193/2001/QD-TTg of December 20, 2001;

The Finance Ministry hereby guides the implementation of a number of contents as follows:

Chapter I

SETTING UP, ORGANIZATION AND ADMINISTRATION OF CREDIT GUARANTEE FUNDS

1. Conditions for setting up a credit guarantee fund

- Having a scheme on setting up of a credit guarantee fund already approved by the president of a provincial/municipal People's Committee. The scheme contents must prove the credit guarantee demands of small- and medium-sized enterprises operating in the locality, and the feasible plan on organization and operation of the credit guarantee fund for the first three years.

- Having enough charter capital of at least VND 30 billion allocated by the provincial/municipal budget and/or contributed by organizations and individuals at home and abroad.

- Having a list of the expected personnel of the management council, the control board and the executive board, who have the full civil act capacity, university degrees and at least 5 years' experience of working in the economic or finance-banking domain.

- Having a draft charter compliant with the provisions of Article 6 of the Regulation on setting up, organization and operation of credit guarantee funds, promulgated together with the Prime Minister's Decision No. 193/2001/QD-TTg and other law provisions.

2. Order of setting up credit guarantee funds:

- Basing themselves on credit guarantee demands of small- and medium-sized enterprises in their localities, the presidents of the provincial/municipal People's Committees shall issue decisions on the establishment of preparatory committees for setting up of credit guarantee funds (called preparatory committees for short).

A preparatory committee is composed of representatives of the provincial/municipal Finance Service, Planning and Investment Service, the State Bank's branch, and organizations supporting small- and medium-sized enterprises.

The preparatory committee is tasked to assist the president of the provincial/municipal People's Committee in studying and elaborating the setting up scheme and prepare conditions for setting up the credit guarantee fund, then submit it to the latter for consideration and decision.

The preparatory committee shall dissolve after the president of the provincial/municipal People's Committee issues the decision on setting up of the credit guarantee fund.

- Basing themselves on the conditions for setting up credit guarantee funds, the presidents of the provincial/municipal People's Committees shall consider and decide on the setting up of credit guarantee funds in their localities.

- Within 15 days after credit guarantee funds officially commence their operation, the presidents of the provincial/municipal People's Committees shall have to report to the Finance Ministry on the setting up of such credit guarantee funds in their respective localities. Such a report must be enclosed with copies of relevant documents, including:

+ The decision on setting up of a credit guarantee fund and the approved charter of such fund.

+ The approved scheme on setting up of the credit guarantee fund.

+ Relevant documents proving that the conditions for setting up the credit guarantee fund are fully met such as: agencies' documents and decisions on contribution of capital to set up the credit guarantee fund; university degrees and diplomas of full-time members of the management council, the control board and the executive board.

3. Conditions for commencing operation of credit guarantee funds

Within 6 months after the presidents of the provincial/municipal People's Committees issue decisions on their establishment, the concerned credit guarantee funds shall have to commence their operation. At least 30 days before commencing its operation, a credit guarantee fund must publish on a newspaper or announce on the mass media in its locality for three consecutive issues its setting-up decision, operation contents and scope, and its clients.

4. Organizational structure and administration of professional operations of credit guarantee funds

4.1. Basing themselves on the Prime Minister's Decision No. 115/2004/QD-TTg, the conditions and capability of each locality, the presidents of the provincial/municipal People's Committees shall consider and decide on organizational structure and administration of professional operations of credit guarantee funds according to one of the following models:

a/ Setting up a credit guarantee fund with the independent legal person status and composed of the management council, the control board and the executive board according to the current regulations. Credit guarantee funds shall entrust the administration of credit guarantee operations to the Development Assistance Fund or local financial funds (the entrusted units). The credit guarantee funds and their entrusted units must sign contracts on entrustment services, which must state entrusted jobs; tasks and powers of contractual parties; entrustment charges and charge payment mode; contract term; information and reporting regime; settlement of disputes, handling of risks, and other clauses.

b/ Not setting up credit guarantee funds with the independent legal person status. The presidents of the provincial/municipal People's Committees shall issue decisions on assigning the task of providing credit guarantees for small- and medium-sized enterprises to local financial funds.

4.2. Local financial funds which are allowed to administer professional operations of credit guarantee funds (as entrusted units or assignees of credit guarantee task) must fully satisfy the following conditions:

- Having the independent legal person status and organizational structure.

- Having one of their operation functions or tasks being provision of credits to clients.

- Their leaderships and officials performing the task of providing credit guarantees for small- and medium-sized enterprises are university graduates and have at least 5 years' experience of working in the finance-banking domain.

- Having healthy financial status and positive business results in the latest two years with revenues larger than expenditures.

- In cases where credit guarantee funds with the independent legal person status are not set up and the presidents of the provincial/municipal People's Committees issue decisions on assigning the task of providing credit guarantees for small- and medium-sized enterprises to local financial funds, the minimum capital level which must be added to such local financial funds for performance of the credit guarantee task shall be VND 30 billion (allocations of local budgets and contributions of organizations).

4.3. Basic contents on responsibilities and powers of credit guarantee funds and entrusted units under entrustment contracts

a/ For credit guarantee funds:

- To formulate regulations and professional process guiding professional operation contents of credit guarantee funds, then transfer them to entrusted units for use as basis for implementation.

- To supply information on policies on clients eligible for credit guarantees in each period so that entrusted units shall receive and consider dossiers of application for credit guarantees.

- To authorize the entrusted units to exercise their powers and perform their tasks in providing credit guarantees to clients defined at Point 1, Article 21 of Decision No. 193/2001/QD-TTg. To authorize their entrusted units to sign contracts on compulsory loans with clients, recover loan principals and interests from clients.

- To pay entrustment service charges to their entrusted units under entrustment contracts.

- To inspect and supervise their entrusted units' observance of regulations and professional process applicable to credit guarantee funds.

- To transfer sufficient money amounts to their entrusted units for performance of guarantee commitments with credit institutions.

b/ For units entrusted to perform credit guarantee operations:

Units entrusted by credit guarantee funds shall have to perform all credit guarantee operations of credit guarantee funds according to regulations, including:

- Receiving and examining dossiers strictly according to regulations and professional process for guarantees of credit guarantee funds, then deciding or refusing to provide credit guarantees to clients.

- Exercising rights and performing obligations of credit guarantee funds in the provision of credit guarantees to clients prescribed at Point 1, Article 21 of Decision No. 193/2001/QD-TTg.

- Performing the guarantee commitments immediately after receiving money amounts transferred by credit guarantee funds. Upon performance of guarantee commitments for clients, the entrusted units shall request clients to acknowledge compulsory loans with an interest rate equal to 150% of the lending interest rate under credit contracts already signed between the clients and the credit institutions. The entrusted units shall have to recover principals and interests of such compulsory loans.

- Fully reporting on the administration of professional operations for credit guarantee funds regularly or irregularly at requests of such credit guarantee funds. Particularly for compulsory loans, the entrusted units shall have to send monthly reports on financial status of debtors, situation and possibility of debt recovery to the credit guarantee funds.

- Performing other jobs according to agreements between the credit guarantee funds and their entrusted units.

- Enjoying the entrustment service charge according to agreements with the credit guarantee funds.

4.4. Basic tasks of local financial funds when being assigned the credit guarantee task

- To manage and use capital of the credit guarantee funds strictly according to regulations.

- To provide credit guarantees for small- and medium-sized enterprises in strict compliance with the provisions of Decision No. 193/2001/QD-TTg and relevant legal documents.

- To manage revenues and expenditures, and distribute revenue-expenditure differences for credit guarantee activities in strict compliance with the provisions of this Circular.

5. Credit guarantee contracts

- Credit guarantee contracts shall be agreed upon and signed by the agencies managing professional operations of credit guarantee funds with guaranteeing credit institutions and guaranteed clients. A credit guarantee contract contains the following principal contents:

+ Names and addresses of the agency administering the professional operations of the credit guarantee fund, the guaranteeing credit institution and the guaranteed clients.

+ Guarantee purposes, objects and scope.

+ Total value of loans borrowed by clients from the credit institution.

+ Total value of assets mortgaged or pledged at the credit institution.

+ Guarantee sum, guarantee term, guarantee charge and mode of collecting guarantee charge.

+ Rights and obligations of the parties to the guarantee contract.

+ Provisions on debt acknowledgement and guarantee refund.

+ Settlement of arising disputes.

+ Other agreements.

- Credit guarantee contracts may be amended and/or supplemented or cancelled if so agreed by the involved parties.

- A credit guarantee contract shall terminate in the following cases:

+ Guarantee obligations have been fulfilled by the agency administering the professional operations of the credit guarantee fund and the clients have fulfilled obligations toward the agency administering the professional operations of the credit guarantee fund.

+ The guarantee obligation terminates according to law provisions.

+ Clients have fulfilled their obligations toward the credit institution and the agency administering the professional operations of the credit guarantee fund.

+ The credit guarantee term has expired in cases where the guarantee contract contains provisions on valid term of guarantee.

+ The credit institution agrees on guarantee cancellation according to law provisions.

+ The guarantee is substituted by other measures for securing clients' loans at credit institutions as agreed upon by involved parties.

Chapter II

FINANCIAL MANAGEMENT OF CREDIT GUARANTEE FUNDS

I. For case of setting up credit guarantee funds with the independent legal persons status, and the administration of their professional operations is entrusted to the Development Assistance Fund or local financial funds

1. Provisions on management of capital and assets of credit guarantee funds

1.1. Operation capital of a credit guarantee fund is formed from the following sources:

a/ Charter capital: is the total capital contributed by organizations and individuals and inscribed in the charter of the credit guarantee fund. Charter capital of a credit guarantee fund is formed from:

- Capital allocated by budgets of the provinces or centrally-run cities.

- Capital contributed by credit institutions.

- Capital contributed by enterprises of all economic sectors.

- Capital contributed by professional associations, organizations representing and supporting small- and medium-sized enterprises.

b/ Capital being financial aids of organizations and individuals at home and abroad (including official development assistance capital) for the objective of development of small- and medium-sized enterprises, cooperatives, and programs on agricultural, forestry or fishery development.

c/ Capital supplemented by credit guarantee funds themselves from their operation results.

1.2. Operation capital of credit guarantee funds must be used for the right purposes, with efficiency and safety, and for the following objectives:

- Provision of credit guarantees to clients according to regulations.

- Investment in and procurement of fixed assets in service of operation of the credit guarantee funds according to the principle that the remaining value of such fixed assets must not exceed 7% of the funds' charter capital. All activities of investment in and procurement of fixed assets of the credit guarantee funds must be carried out in strict compliance with the State's regulations on investment and construction management. Annually, the credit guarantee funds must work out plans on investment in and procurement of fixed assets, then submit them to the management councils for consideration and approval, and carry out the investment in and procurement of fixed assets within the approved plans.

- Payment of deposits at the State Treasury and domestic credit institutions located in the same provinces or centrally-run cities.

- Purchase of Government bonds.

- Fulfillment of their guarantee obligations committed with credit institutions when their clients fail to repay debts or fully repay debts to them.

1.3. Professional operation reserve funds

- Professional operation reserve funds are set up by deducting 50% of credit guarantee charges collected from clients, and shall be used for:

+ Providing compulsory loans to clients in proportion to responsibility portions committed for guarantee by the funds in cases where clients fail to repay debts or fail to repay debts as scheduled to the credit institutions. The compulsory loans recovered by the credit guarantee funds shall be refunded to the operation reserve fund.

+ Making up for debts already provided as compulsory loans to clients which are irrecoverable. The financial handling of compulsory loans which are irrecoverable by the credit guarantee funds shall comply with the regulations promulgated by the funds' management councils.

- In cases where a professional operation reserve fund is not enough to provide compulsory loans to clients and make up for irrecoverable debts being compulsory loans, the concerned credit guarantee fund may use its operation capital to fulfill the committed guarantee obligation on behalf of clients.

1.4. Credit guarantee funds shall open accounting books to monitor all existing capital and assets; handle cases of asset damage or loss; asset assignment, sale, liquidation; asset inventory and valuation according to law provisions on State enterprises and relevant legal documents.

2. Revenues of credit guarantee funds

Revenues of credit guarantee funds are amounts actually earned in a year, including:

- Credit guarantee charge.

- Charge for evaluating dossiers of application for provision of credit guarantees.

- Interests of deposits at the State Treasury and domestic credit institutions.

- Interests of Government bonds.

- Interests of overdue debts (compulsory loans) of clients.

- Other revenues, including proceeds from the assignment, sale or liquidation of fixed assets.

Collected amounts of credit guarantee funds shall be fully accounted into their revenues and must be evidenced by valid invoices and documents.

3. Expenditures of credit guarantee funds are actually spent amounts necessary for their operation and evidenced by valid invoices and documents. Expenditure levels and payees shall comply with law provisions. In cases where exist no law provisions thereon, credit guarantee funds shall base themselves on their financial capability to elaborate expenditure norms, decide on expenditures and take responsibility before law therefor. Expenditures must be included in annual financial plans already approved by the management councils, including:

3.1. Expenses for credit guarantee activities:

- Payment of service charges to credit guarantee entrusted units under entrustment service contracts between the two parties.

- Deductions for setting up operation reserve funds.

- Other expenses arising in the course of providing credit guarantees to clients.

3.2. Expenses for laborers:

- Wages, remunerations and expenses of wage and remuneration nature paid to officials and employees.

- Allowances for part-time members of the management councils and the control boards.

- Expenses for mid-shift meals, female laborers, labor protection devices, transaction outfits, severance allowances for laborers according to current regulations.

- Social insurance and medical insurance premiums, trade union funding.

3.3. Expenses for public-duty management activities:

- Expenses for purchase of office supplies: materials, printing papers, stationery.

- Post and communication charges.

- Charges for electricity and water supply, office sanitation, environmental protection and healthcare.

- Expenses for petrol and oil in service of office operations.

- Expenses for domestic and overseas working trips by officials according to the prescribed regime.

- Expenses for guest reception, public relations, festivities, conferences, propagation and advertisement.

- Expenses for training and scientific research.

- Other management expenses.

3.4. Expenditures on assets

- Expenses for fixed assets depreciation, which shall comply with the State's regulations applicable to enterprises.

- Expenses for purchase of asset insurance, for asset maintenance, repair and rent, and purchase of labor tools.

- Expenses for asset assignment, sale or liquidation (including the remaining value of liquidated, assigned or sold assets).

3.5. Payment of taxes, charges and fees.

3.6. Other reasonable and valid expenses prescribed by the Enterprise Income Tax Law and guiding documents.

4. Revenue-expenditure difference: The actual revenue-expenditure difference in a year of a credit guarantee fund is determined as the difference between the total revenue and total reasonable and valid expenditure, and shall be handled after tax payment as follows:

4.1. For cases where revenues are larger than expenditures:

- To deduct 15% for setting up the reserve fund to supplement operation capital of the credit guarantee fund.

- To deduct 10% for forming the financial reserve fund, which shall be used to make up for asset damage or loss incurred in the course of operation of the credit guarantee fund after such damage or loss is compensated by the damage-causing organizations or individuals, by insurance organizations and professional operation reserve fund.

- To deduct 30% for forming the professional operation investment and development fund, which shall be used for investment in expansion of operation scale and renewal of equipment and working conditions of the credit guarantee fund.

- The reward fund and the welfare fund shall be set up with the maximum deduction equal to three months' actually paid wages in a year.

The reward fund shall be used to regularly and irregularly reward officials and employees working in the credit guarantee fund; or reward individuals and organizations outside the credit guarantee fund that have economic relationships with the credit guarantee fund and have well fulfilled the contractual terms, thus efficiently contributing to the operation of the credit guarantee fund.

The welfare fund shall be used for investment in building, repair or maintenance of welfare works of the credit guarantee fund; for sport, cultural or public welfare activities of the collectives of the fund's officials and employees; for regular or irregular difficulty allowances for officials and employees of the credit guarantee fund.

- The remainder shall be used as profits divided among organizations contributing capital for setting up the credit guarantee fund.

4.2. For cases where revenues are smaller than expenditures: The credit guarantee fund may carry forward that negative revenue-expenditure difference to the subsequent year, provided that the duration for carrying forward negative revenue-expenditure difference does not exceed 5 years. After 5 years, if the negative revenue-expenditure difference cannot be fully offset, the credit guarantee fund shall report such to the president of the provincial/municipal People's Committee for consideration and decision on reduction of operation capital, reorganization or dissolution of the credit guarantee fund.

5. Tax obligations of credit guarantee funds

Credit guarantee activities of credit guarantee funds shall not be subject to value added tax.

Other taxes, charges and fees arising in the course of operation of credit guarantee funds shall comply with the current law provisions.

6. Accounting regime applicable to credit guarantee funds

The accounting and monitoring of guarantees provided by credit guarantee funds shall be effected in compliance with the system of book-keeping accounts, promulgated by the Finance Ministry.

II. For cases where credit guarantee funds with the independent legal person status are not set up, the presidents of the provincial/municipal People's Committees shall assign the credit guarantee task to local financial funds

- Local financial funds shall have to separately account and monitor the whole operation capital of credit guarantee funds. Operation capital of credit guarantee funds must be used for the right purposes, with efficiency and for the following objectives:

+ Provision of credit guarantees to clients according to regulations.

+ Use of 7% thereof at most to supplement capital for investment in, and procurement of, fixed assets in service of operation of local financial funds.

+ Deposits at the State Treasury and domestic credit institutions located in the same province or centrally-run city.

+ Purchase of Government bonds.

+ Performance of the funds' guarantee obligations committed with credit institutions when clients fail to repay debts or to fully repay debts to such credit institutions.

- All revenues and operation expenditures of the credit guarantee funds shall be accounted into revenues and expenditures of local financial funds for determination of their revenue-expenditure differences. Local financial funds shall have to account expenses for setting up the following funds:

+ 50% of the collected credit guarantee charges shall be deducted for setting up the professional operation reserve funds, which shall be used according to the provisions of Point 1.3 of Section I above.

+ 15% of the collected credit guarantee charges shall be deducted for setting up the reserve funds to supplement operation capital of credit guarantee funds.

- Credit guarantee activities of credit guarantee funds shall not be subject to value added tax. Local financial funds shall have to declare and pay other taxes, charges and fees arising in the operation course according to the current law provisions.

Chapter III

INFORMATION, REPORTING AND INSPECTION REGIME

1. For clients:

Clients shall have to report to the agencies administering the professional operations of credit guarantee funds and be subject to the periodical or unexpected inspection of their activities related to guaranteed transactions by such agencies and the credit guarantee funds. Contents of reports and inspection regime of credit guarantee funds shall be agreed upon by the involved parties and inscribed in credit guarantee contracts.

2. For credit guarantee funds

- The reporting on their operation to organizations and/or individuals contributing capital to the funds shall comply with the provisions of the funds' charters.

- Credit guarantee funds shall have to sum up their credit guarantee activities and general operation situation, then make and send to the provincial/municipal People's Committees and the Finance Ministry the following quarterly and annual reports:

+ Grade-III account balance sheets, financial revenue-expenditure reports. Report forms shall be made according to the State's regulations applicable to enterprises.

+ Reports on provision of credit guarantees to clients, debit balances and recoverability of compulsory loans, made according to the enclosed forms (not printed herein).

- Local financial funds assigned the credit guarantee task shall have to make operation reports and financial reports according to the regulations applicable to local financial funds. Apart from the above-said reports, local financial funds shall have to send to the provincial/municipal People's Committees and the Finance Ministry quarterly and annual reports on capital sources of credit guarantee funds, situation of providing credit guarantees to clients, debit balances and recoverability of compulsory loans and other reports when so requested.

- Time limits for sending reports: Quarterly reports must be sent within 45 days after the end of a quarter. Annual reports must be sent within 60 days after the end of a year.

- Credit guarantee funds shall be subject to the inspection by the provincial/municipal People's Committees, the Finance Ministry and the concerned agencies according to current law provisions.

3. For entrusted units

Entrusted units shall have to regularly and irregularly report to credit guarantee funds on the administration of operations of credit guarantee funds according to the provisions of Point 4, Chapter I of this Circular.

Chapter IV

DISPUTES, LEGAL PROCEEDINGS, DISSOLUTION AND LIQUIDATION

1. All disputes and legal proceedings between credit guarantee funds and legal persons and individuals, directly or indirectly related to operation of credit guarantee funds, shall be handled according to the current law of the Socialist Republic of Vietnam.

2. The reorganization or dissolution of credit guarantee funds shall comply with decisions of the presidents of the provincial/municipal People's Committees and the current law provisions on enterprises.

Chapter V

ORGANIZATION OF IMPLEMENTATION

1. The presidents of the provincial/municipal People's Committees and the chairmen of the management councils of credit guarantee funds shall have to strictly implement the Regulation on setting up, organization and operation of credit guarantee funds, promulgated together with the Prime Minister's Decision No. 193/2001/QD-TTg and Decision No. 115/2004/QD-TTg, and the guidance in this Circular.

Quarterly and irregularly, the presidents of the provincial/municipal People's Committees shall report to the Finance Ministry on credit guarantee results and operations of credit guarantee funds in their localities, and propose measures to overcome difficulties in the funds' operation.

2. Credit guarantee funds shall have to promulgate documents providing specific professional guidance according to the provisions of the Prime Minister's Decision No. 193/QD-TTg and Decision No. 115/2004/QD-TTg and the guidance in this Circular.

3. In the course of implementation organization, the Finance Ministry shall inspect and supervise the setting up, organization, operation of, and observance of law provisions by, credit guarantee funds in the provinces and centrally-run cities.

4. This Circular takes effect 15 days after its publication in the Official Gazette and replaces the Finance Ministry's Circular No. 42/2002/TT-BTC of May 7, 2002. Any problems arising in the course of implementation should be reported to the Finance Ministry for consideration, amendment and supplementation.

For the Finance Minister

Vice Minister
LE THI BANG TAM